Need advice on being a landlord

[Jackie Nguyen]

Hi all, i may be overthinking things, but i’ve been trying to get a general idea of what i could receive in cash flow from my primary property. A little background, i’m currently serving in the army actively and this is my first home(townhome). My mortgage, insurance, and taxes is about $1326/month. Current rents for a 2/2.5 is about 1600-1800. I have a finished basement that i can add a closet to and possibly declare as a 3rd bedroom. I put zero down, but will be spending about $20k to fix the property. I really want to get a property management in because i’m afraid i won’t be able to find a tenant as fast as them. Property management around here is around 8-10%. if i rent at say $1700/month, With property management and %10 aside for vacancy and maintenance, i will have about $60-$130 in cash flow. Im afraid that this range isn’t good enough. Or should i manage the property myself? Any advice or ideas would be great. TIA. 

[Greg M.]

A property manager probably won't get a tenant in place much faster than you. The value to having a property manager is dealing with all the issues that come with being a landlord. 

Different people will look at that $20K differently. I personally don't consider it an expense, because it adds value to your property. The cost of it is it's lost return use elsewhere - say 5% or $1,000 a year.

There is more to life than cashflow. $60-$130 in cashflow is meaningless. The benefit you need to look at is the principal reduction every month. I'm going to guess that every month your mortgage balance goes down by around $600. That's +$600 in your net worth every month. As every day passes, that number will only get bigger. And most likely your free cashflow will also get bigger as rent increases. 

Would I invest $20K at a cost of $1K to get $7200 in principal reduction and $720-$1560 in cash back each year? Hell yeah!